Local Lenders Wait on Central Bank for Credit Card Approvals

Lenders expect logistical hurdles, inexperience and red tape to stall the introduction of credit cards in the immediate future.

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By Kyaw Hsu Mon 11 May 2015

RANGOON — After some local banks unofficially received word last week that they would be permitted to issue credit cards, lenders expect logistical hurdles, inexperience and red tape to stall their introduction in the immediate future.

Zaw Lin Htut, chief executive of the Myanmar Payment Union (MPU), told The Irrawaddy that the Central Bank had last week informed a number of local banks they would be permitted to offer their customers credit cards from May 8. Bankers have yet to receive an official letter to that effect, and Zaw Lin Htut said he expected teething problems in the months to come.

“Once the Central Bank allows local banks to issue credit cards, I think it will be at least two or three months before customers can actually use them here,” he said.

Local banks are required to submit detailed business plans to the Central Bank before they will be permitted to issue credit cards. The Myanmar Payments Union, launched by the Central Bank in 2012 and comprising more than 20 private and state-owned banks, will be given responsibility for managing their use.

Pe Myint, managing director of the Cooperative Bank, said that his company had been waiting for the Central Bank’s approval since submitting a proposal three months ago which would secure credit card accounts against customer deposits.

“I heard the Central Bank approved credit cards, but we’re still waiting this official approval now,” he said.

The former military regime stopped the local issuing of credit cards in response to a surge in bad debts after the 1997 Asian Financial Crisis. Burma’s banking system still lacks a credit bureau to gauge the suitability of loan applicants, which has led bank managers to devise cautious business plans similar to those of the Cooperative Bank.

“We had the experience of 1997 and 1998, when credit cards were issued without a credit bureau,” said Than Lwin, senior consultant of KBZ Bank. “This time, we should consider this lesson. No one should dare to issue credit cards without knowing their history here.”

Proposals to introduce a national credit bureau were floated in 2012 but have languished in the years since. The MPU’s Zaw Lin Htut said that lenders would ultimately need to bear responsibility for assessing the creditworthiness of their customers.

“There are good and bad aspects to using credit cards here,” he said. “As the country is developing, we need these sorts of financial developments, but banks will have to treat the financial background of customers cautiously before issuing cards.”